Avoiding Errors & Omissions In Flood Insurance Moderator: M. Rita Hollada, CPCU, CIC, CPIA Sally Combs, Technical Director, Professional Liability Claims, Fireman s Fund Ins. Co. Patrice Collingwood, Senior V. P., Marsh USA
WHAT YOU DO MAKES A DIFFERENCE!
Lessons Learned from Superstorm Sandy Sally Combs Technical Director, Professional Liability Claims, Fireman s Fund Ins. Co.
Lessons Learned Common Causes of E&O Claims No Flood policy in place at the time of the storm. Reason: Failed to offer flood insurance Reason: Failed to submit application on time or failed to submit payment with application Reason: Submission of a binder to lender
ANYBODY CAN FLOOD!
Avoiding Errors & Omissions In Flood Insurance Do you suggest flood insurance to every client regardless of flood zone?
Lessons Learned Common Causes of E&O Claims No contents coverage on Flood policy Reason: Insured misunderstood that there is no automatic coverage Reason: Agent failed to specifically discuss contents
Lessons Learned Common Causes of E&O Claims No coverage for Other Structures or Pool Cages Reason: Agent filed to point out that each structure must be separately insured Reason: Agent failed to understand definition of building Reason: Agent failed to explain Property Not Covered
Avoiding Errors & Omissions In Flood Insurance Do you inspect all of the properties that you insure? Do you suggest a flood policy for each building on the premises? The General Property Form and RCBAP do not provide coverage for appurtenant private structures. Coverage for a detached garage responds only on one-to fourfamily residential buildings insured under the Dwelling Form. The insured may elect to apply 10 percent of the building coverage for an appurtenant private structure. This is not an additional amount of insurance. NFIP Adjusters Manual
Avoiding Errors & Omissions In Flood Insurance What is a detached private garage? We do not cover any detached garage used or held for use for residential (i.e.dwelling), business or farming purposes NFIP Dwelling Policy For example, a detached garage that has been converted and contains a separate room such as a play room, home workshop, laundry room, workout room, or bathroom receives no coverage unless it is insured under a separate policy. NFIP Adjusters Manual
This is probably NOTa private garage
Lessons Learned Common Causes of E&O Claims Inadequate limits overall Reason: Insured wanted to insure only what was required by the lender Reason: Agent failed to failed to offer excess flood coverage Reason: Agent did not explain valuation of property Reason: Agent offered higher limit but failed to document the declination by the insured
Avoiding Errors & Omissions In Flood Insurance Do you discuss the valuation method that will be applied to property at the time of loss ALL Personal Property - ACV MOST structure ACV Exception; Single Family, Principal Residence insured to 80% of RC Building in RCBAP No Coinsurance Clause other than RCBAP
Lessons Learned Common Causes of E&O Claims Some items not covered by the Flood Policy Reason: Agent did not explain limitations in a basement or under certain elevated buildings Reason: Agent failed to point out Property Not Covered and Special Limit
Avoiding Errors & Omissions In Flood Insurance Do you review the limitations found in the flood policy Limited coverage in a basement all zones Limited coverage under a Post Firm elevated building in the SFHA Property not covered $2500 Total on valuable items Exclusions
Avoiding Errors & Omissions In Flood Insurance Property not covered Wells and septic systems Property in the open (incl building materials) Anything outside the perimeter walls Screened porches OK Attached awnings OK Decks more than 16 sq ft More than one staircase to the deck Hot tubs and swimming pools
Flood Insurance for Specialty Risks Patrice Collingwood Senior V. P., Marsh USA
Large Accounts Common Causes of E&O Claims Inadequate coverage available for large property risks There is no scheduled policy form available Solution: Seek coverage in the excess market Business income coverage not available from the NFIP The NFIP covers direct damage by flood; all indirect of financial loss must be sought in the specialty marketplace
Property Ownership Common Causes of E&O Claims Tenant Improvements and Betterments must be identified and insured properly Only one building may be issued per property address Tenant cannot purchase building coverage Owner of a commercial condominium unit cannot purchase building coverage Owner and tenant can be joint named insureds
Property Ownership Common Causes of E&O Claims Business owner may not insure Property of Others under the NFIP policy No Bailees coverage No consignment goods Vehicle dealers stock is not insurable for flood under the NFIP policy Automobiles Motorcycles Farm implements
BAILEE GOODS Customer property held by commercial bailees, such as shoe repair shops, dry cleaners, laundries, and consignment shops, are not covered by the bailee's Standard Flood Insurance Policy (SFIP) for personal property. Only personal property owned solely by the insured is covered by the General Property Form. The bailor can take out a separate flood policy for his property while located at the bailee's location, provided the property location is that of the bailee. There is no coverage for property such as the neighbor's lawn mower or the cable box under the Dwelling Form. NFIP Adj Manual VIII-1
Property Ownership Common Causes of E&O Claims Trust owned properties How to express the Named Insured Documentation necessary to prove Principal residence to secure Replacement Cost valuation at the time of loss Doumentation necessary to qualify for Primary residence surcharge
Avoiding Errors & Omissions In Flood Insurance Do you confirm the ownership of the Building and Contents being insured? Do you confirm that the named insured is the sole owner of the property being insured? We insure property owned by the insured and household members or property of guests or servants (Dwelling Form) We insure property owned solely by the named insured (Gen l Property Form)
New Issues in Flood Insurance M. Rita Hollada V. P., The Insurance Professionals, Inc.
Avoiding Errors & Omissions In Flood Insurance Surcharges applicable Primary Dwelling vs. Non-Primary structues Clarify documentation necessary Clarify surcharge applicable
Avoiding Errors & Omissions In Flood Insurance Newly Mapped Properties Observe eligible effective dates to qualify Explain phase in of full actuarial rates Estimate final premium
Avoiding Errors & Omissions In Flood Insurance Grandfathering New property owner can assume policy Compare rates if grandfathered zone and BFE Rate the property as beneficial to the insured
Avoiding Errors & Omissions In Flood Insurance Do you confirm the flood zone and BFE on each property by Securing a Flood Zone Determination Reviewing the Community s Flood Map Do you review the Lowest Floor Guide To confirm lowest floor for rating To confirm proper venting
Agency Practices to Avoid Errors & Omissions In Flood Insurance Do you monitor and review flood policy expirations / renewals? Do you review updates to the NFIP manual when issued? WYO Company Bulletins (NFIPiservice.com) Do you confirm coverage is on the correct policy form?
Avoiding Errors & Omissions In Flood Insurance When I get back to the office... I WANT TO... BECAUSE... SO I CAN...
Avoiding E&0 In Flood Insurance THE END